With more than two million page views and more than 4,500 items, this blog provides news and commentary on public policy, business and economic issues related to the $3 billion California stem cell agency, officially known as the California Institute for Regenerative Medicine(CIRM). David Jensen, a retired California newsman, has published this blog since January 2005. His email address is djensen@californiastemcellreport.com.

Wednesday, March 18, 2015

The California stem cell agency tomorrow is expected to all but
bury a $500 million loan plan pushed by its first
chairman, Robert Klein, and replace it with something exceedingly more modest.

The current loan effort is “overly complex, administratively
burdensome, and, as reflected in the number of loans issued, it does not appear
to be attractive to industry,” said agency President Randy Mills in a forthright memo to the agency board.

Robert Klein, CIRM photo

Klein’s dream was that loans would generate revenue through
interest payments and help to ensure the $3 billion agency’s existence. The
agency’s board paid $50,000 for a PricewaterhouseCoopers study that said $500 million in loans could generate a major return.

“How do you turn $500 million into as much as $1 billion
over 10 years? Loan it to struggling biotech companies that could default on
the loans at a rate of up to 50 percent.

“Sound too good to be true? Maybe, but that's what the California stem cell
agency is projecting….”

In 2007 and 2008, Klein, a real estate investment banker, bandied
about a variety of numbers that ranged up to $1 billion. The agency finally
settled in 2008 on $500 million to commit to loans. The concept had a special allure
because biotech companies are perennially cash-starved. But only five
companies ultimately received loans, two of which are outstanding. The agency has
made 666 research awards, including the five loans.

Mills plans to replace the existing loan effort in his first
foray into CIRM 2.0, a radical move to speed funds to researchers that he
intends to extend to all awards made by the California Institute for
Regenerative Medicine (CIRM), as the agency is formally known.

In his loan memo, also authored by two CIRM attorneys and
the agency’s business development officer, Mills said the initial recipients in
the CIRM 2.0 launch would

“…have the option to elect to convert their award from a
grant to a loan within a specified period of time from the effective date of
the award, e.g., seven years. Unless the
parties agreed to different terms, the awardee would be required to repay the
loan balance within ten days of making the election to convert from a grant to
a loan at an interest rate that would escalate based on the date of
repayment. For example, an awardee that
repaid CIRM within three years of the effective date of the award would pay a
lower interest rate than an awardee that elected to convert to a loan six years
after the effective date."

Mills said his plan is simpler, more realistic and
compelling to recipients than the agency’s current loan effort.

The board’s
Intellectual Property Subcommittee is expected to back Mills’ changes at its 10
a.m. meeting tomorrow with full board
ratification on March 26. The public and
potential recipients of CIRM loans can speak to the matter at two public locations in San Francisco, one each in Hawaii, Irvine, San Diego, Los
Angeles and Redwood City. Complete
addresses are available on the agenda.

Proposed changes in the loan program were initially
scheduled to be approved in January, but that attempt was suspended with no public
explanation.

(Editor's note: The meeting was postponed on March 19. No explanation was posted on the CIRM Web site. The link to the memo from Mills was removed from the IP agenda, but a copy still could be found (as of this writing on March 19) on the March 26 agenda for the board meeting.)

About Me

The California Stem Cell Report is the only nongovernmental website devoted solely to the $3 billion California stem cell agency. The report is published by David Jensen, who worked for 22 years for The Sacramento Bee in a variety of editing positions, including executive business editor and special projects editor. He was the primary editor on the 1992 Pulitzer Prize-winning series, "The Monkey Wars" by Deborah Blum, which dealt with opposition to research on primates. Jensen served as a press aide in the 1974 campaign and first administration of Gov. Jerry Brown. (Time served: two years and one week.) He writes from his sailboat on the west coast of Mexico with occasional visits to land. Jensen began writing about the stem cell agency in 2005, noting that it is an unprecedented effort that uniquely combines big science, big business, big academia, big politics, religion, ethics and morality as well as life and death. The California Stem Cell Report has been identified as one of the best stem cell sites on the Internet. Its readership includes the media (both mainstream and science), a wide range of academic/research institutions globally, the NIH and California policy makers.